What is a Reverse Stock Split? Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. Editorial disclosure
All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. SHARE: Luis Jou Garcia/Getty Images March 15, 2022 Roger Wohlner is a contributing writer for Bankrate. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. A reverse stock split occurs when a publicly traded company divides the number of outstanding shares by a certain amount. This serves to decrease the number of outstanding shares and increase the price per share of those outstanding shares. This differs from a where the number of shares increases, and the share price declines post-split. Reverse stock split What that means
With a forward stock split, a company increases the number of shares outstanding and lowers the price per share. With a reverse stock split, a company reduces the number of shares outstanding and boosts the share price. An excellent illustration of a recent reverse stock split is General Electric. The company declared a 1:8 stock split back in July 2021. This corporate action increased the share price by eight times on the effective date of the reverse split and reduced the number of shares outstanding by dividing the pre-split total by eight. Why companies do reverse stock splits
There can be several reasons for a company to embark on a reverse stock split. Prevent being delisted
If a company’s share price gets too low, it could face the delisting of its shares by the stock exchange where the shares trade. Being listed on an exchange is important to ensuring public trust in a company and maintaining investor interest. A reverse split can be a quick way to push the share price above required levels for continued listing. Boost the share price to enhance the company s image
If a company’s share price falls into the single digits per share or lower, investors may look at the shares as a . The low share price may put the stock off-limits for some investors, especially institutional investors, which may be required by their charter to avoid shares with a low price per share. Gain more attention from analysts and large investors
Once a stock’s share price falls too far, it may drop off the and institutional investors. In the latter case, institutions may shy away from stocks whose share price is regarded as too low. Are reverse stock splits good or bad
All things equal, a reverse stock split is neither good nor bad. However, they often carry a negative connotation as many of the companies doing them are countering a sharp drop in share prices. “It is usually a very negative sign when a company reverse splits their stock,” says Charles Kaplan, president of the investment consulting firm Equity Analytics. He indicated that the market reaction is often dependent upon other steps the company may take to reverse the situation that has led to its lower share price. What happens to your shares following a reverse stock split
The total value of the shares — the company’s market capitalization — will be the same after the reverse split as it was prior to the split. The exception to this would be if the company decided to pay out as cash any that would result from the reverse split. If your shares are held by an or other type of custodian, the transaction will be seamless to the shareholder and will be handled electronically. There would normally not be any tax implications from a reverse stock split. One exception is a reverse split where cash payments were issued to shareholders in lieu of fractional shares. These distributions would be depending upon the shareholder’s cost basis and holding period. This of course, would not be an issue if the shares were held in a tax-advantaged retirement account like an . At the end of the day, investors should look at any announcement of a reverse stock split based on the unique issues and fundamentals of the individual company and its stock. Whether a reverse stock split ultimately works out to be a positive or negative for shareholders will depend on the situation surrounding the specific company. Learn more
SHARE: Roger Wohlner is a contributing writer for Bankrate. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Related Articles